Appearing at a press conference in Brussels, Barnier said that the lack of progress in talks was "very disturbing."

"We've reached a state of deadlock, which is very disturbing. We are not asking the UK to make concessions," he said.

Those words caused a sharp drop in the pound against all major currencies, with sterling losing roughly 0.5% against the dollar to $1.3156 by 12.10 p.m. BST (7.10 a.m. ET), as the chart below shows: Markets Insider Sterling's fall against the Japanese yen has been even more marked, losing close to 0.7% of its value on the day:

Markets Insider Markets seem to be interpreting Barnier's comments as a signal that Britain is moving closer to so-called "no deal" Brexit, which would mean Britain failing to secure any agreement with Brussels before March 2019 and drop out of the EU with a highly uncertain future.

"The pound reacted poorly to what Barnier had to say, the European Chief Negotiator for Brexit stating that the two sides had reached a 'very disturbing' 'deadlock' over the issue of the UK's payments to the EU," Connor Campbell, an analyst at Spreadex, said in an email.

"These comments overshadowed Barnier's claim that 'decisive progress is within our grasp over the next two months', as well as the news that an agreement had been reached over Ireland."